The end of the year is such a hectic time, with holiday shopping, family get-togethers, parties and other festive occasions. Thinking about money hardly seems in tune with the season. But the end of the year is precisely the right time to map out financial strategies for the coming year. Following these 10 tips can help make 2016 your most prosperous year ever. Now that’s really something to celebrate!
1. Review Your Credit Report
According to a 2013 Federal Trade Commission Report, one in five Americans had errors on at least one of three credit reports, and five percent of Americans had credit report errors that were serious enough to have adverse effects on their ability to obtain credit. All consumers are entitled to obtain credit reports once per year from each of the three major credit reporting bureaus: TransUnion, Equifax and Experian – and the end of the year is an ideal time to correct any errors that might be contained on your report. You should also work to resolve negative credit report items that are accurate.
2. Update Your Budget
Life changes, and your budget should reflect those changes. Major life events such as marriage, beginning or adding to your family and purchasing a home have a significant impact on your finances. The end of the year presents a great opportunity to update your budget to reflect those changes. Smaller changes count too – consider changing your cell phone plan or re-evaluating your car and home (or renter’s) insurance coverage to better suit your circumstances – and possibly to save money.
3. Plan for Major Expenditures
It may be too late to minimize the financial pain of this year’s holiday spending – but the end of the year is an ideal time to plan for next year’s holiday season. Consider starting a dedicated savings account so that you can purchase gifts with cash, not plastic. Are you planning a big vacation next summer? Don’t wait until May to start thinking about how you’ll pay for it. Beginning your planning at the end of the year helps to ensure that you’ll have plenty of money to make that next vacation one to remember.
4. Develop Income Growth Strategies
Many people suffered major financial setbacks as a result of the recent recession. Even if you escaped the recession relatively unscathed, you may be focused more on maintaining the status quo. However, a smarter strategy is to work toward growing your income, whether it’s asking your boss for a raise if you work at a job or working aggressively toward growing your client base if you’re an entrepreneur.
5. Resolve to Begin Saving (More)
You’ve heard and read this advice from financial experts for years: pay yourself first. But with bills and other obligations, it can be difficult advice to follow. The end of the year is a good time to prioritize your spending and make cuts where you can. If you always have more month than money, you’ll need to make significant cuts to balance your budget. If you’re keeping even with your expenses, stick with modest cuts that don’t feel like deprivation. But establishing a saving habit, or stepping up your saving can make a significant beneficial impact on your budget – sooner than you think!
6. Deplete Your FSA
Many companies allow employees to establish Flexible Spending Accounts as part of their health care benefits. Some companies even match or partially match their workers’ contributions. But that money comes with a significant caveat – it must be spent by the end of the calendar year. Any money left in an FSA, with the exception of 500 dollars that can be carried over to March of the following year, is forfeited. There’s little wisdom in leaving money on the table. So make those doctor’s appointments you’ve been putting off, buy a new pair of contacts – or two, but spend that dough.
7. Make a Dent in Your Debts
If you’re just making the minimum payments on your credit cards, your account may be in current standing, but you’re hardly doing your finances any good. Credit card companies love consumers like you – you pay regularly – and pay, and pay, and pay. Especially if you’re using credit to pay for restaurant meals or for other non-durable purchases, you’ll be making payments long after that meal is forgotten. A fairly painless way to make a dent in your debts is by employing the snowball strategy. Increase the amount you pay on your largest bill (or your bill with the largest APR) as much as possible until it’s paid off. Then take the amount you were paying towards that bill and add it to the payment amounts for the next highest. Rinse and repeat with your next largest bill, and your next, until you suddenly realize that you owe way less money than you did before.
8. Convert Clutter to Cash – or Deductions
If you have unused possessions that are collecting dust, why not either sell them or donate them? That designer jacket that matches nothing in your closet can fetch a tidy sum at a consignment shop. Online platforms like eBay and Craigslist also allow you to get rid of unwanted clutter. Or if you’re feeling charitable, make a donation to a worthy cause. Just be sure to get a receipt, so that you can take credit for your generosity at tax time. Your closets — and your pocketbook will thank you!
9. Update Your Investment and Retirement Portfolios
Do you have a 401(k)? How about stocks? The end of the year is an ideal time to reassess your investments. If you’re in your 20’s, 30’s or 40’s, consider taking a more aggressive investment approach. If you’re closer to retirement, you might want to shift your nest egg into more secure financial instruments.
10. Consider Estate Planning
No one likes to think about estate planning and dealing with final expenses, but doing so ensures that your family won’t have that burden to deal with. If you haven’t written a will or established a trust, the end of the year is an ideal time to take care of that task. If your estate planning is already in place, it can’t hurt to check it out to make sure that your wishes are still expressed by the plans you’ve established.
All the Best for the New Year!
Many of the suggestions listed above can be carried out in a short period of time, in some cases, less than an hour. For those tasks that are more involved, approach them in manageable time slots to avoid becoming overwhelmed. And if you have questions that you can’t figure out on your own, it’s a worthwhile investment to seek the services of a financial or tax professional. Here’s to a prosperous new year!
Audrey Henderson is a Chicagoland-based writer and researcher. She holds advanced degrees in sociology and law from Northwestern University. Her writing specialties are sustainable development in the built environment, policy related to arts and popular culture, socially and ecologically responsible travel, civic tech and personal finance.